Top Down Strategy and Large Cap Stock Picks - the DBS Vickers ...

Regional Equity Strategy Q4 2007
Country Assessment
Reits are preferred over Property stocks, offering more upside at 21% compared to only 2%
last quarter. The average forward DPU yield is now 4.9%, which compares favorably against low
10 yr bond yield forecasts at 2.9%(+20bp). Meanwhile, the underlying asset upcycle remains
intact, and the rental markets for most asset classes remain firm. Our preferred pick is CDL
Hospitality Reit, which is the largest hotel owner in Singapore, which will benefit from the
tourism theme. It offers a decent yield of 3.8% and strong organic growth on the back of the
rise in hotel room rates.
Singapore REITS
Last Price
DBSV
Price
Yield (%)
17-Sep-07 Target FYE Current Forward Recom'd
Singapore (S$)
A-REIT 2.65 3.16 Mar 4.8% 5.5% B
CapitaCommercial Trust 2.61 2.97 Dec 3.2% 4.3% H
CapitaMall Trust 3.56 4.31 Dec 4.0% 4.3% B
Fortune REIT (HK$) 5.80 6.75 Dec 6.1% 6.2% B
Macquarie MEAG Prime REIT 1.21 1.48 Dec 5.0% 5.9% B
Mapletree Logistics Trust 1.15 1.46 Dec 5.1% 5.4% B
Suntec REIT 1.86 2.20 Sep 4.5% 5.4% B
Allco Commercial Real Estate 1.04 1.45 Dec 6.2% 6.4% B
Ascott Residence Trust 1.74 2.30 Dec 4.1% 4.4% B
K-REIT 2.40 3.70 Dec 3.2% 4.0% B
CDL Hospitality Trust 2.35 2.90 Dec 3.9% 5.5% B
CapitaRetail China Trust* 2.60 NR Dec 2.6% 3.4% NR
Source: DBS Vickers
While we still like the industrial sector, upside is now 12%, after the strong rebound last
month. We would rotate our interests from shipyard stocks into SembCorp Industries, which
offers investors exposure into offshore and marine sector via its stake in SembCorp Marine and
Utilities division.
Expected Returns Next 12 Months by Sector
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Financials
Consumer Services
Consumer Goods
REITS
Grand Total
Real Estate
Industrials
Oil & Gas
Technology
Telecommunications
Health Care
Utilities
Source: DBS Vickers
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